Sell these ASX lithium stocks and buy this one instead

Goldman Sachs has given its verdict on these stocks.

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There are plenty of options for investors to choose from in the lithium industry.

But according to Goldman Sachs, there's only one ASX lithium stock worth buying right now.

What is the broker saying?

Ahead of the release of quarterly updates this month, the broker has been running the rule over the industry.

This has seen its analysts declare three ASX lithium stocks as sells and one as a buy.

Let's take a look and see what Goldman is saying about these miners and the lithium industry.

Bear market is not over

Firstly, Goldman Sachs has warned investors that the lithium bear market is not over despite a recent uptick in prices. In fact, it believes that a larger surplus is looming in 2025, which could weigh heavily on prices and sentiment. It said:

Our global team highlights that the recent rally in lithium prices should not be interpreted as the end of the bear market, where further supply rationing is needed to reduce both the 2024E surplus and now larger surplus in 2025E, with the top end of the integrated cash cost curve dominated by Chinese lepidolite (US$8k-12k/t LCE) and integrated African concentrates (US$7k-13k/t LCE).

Buy this ASX lithium stock (and sell these)

The one lithium miner that Goldman is recommending as a buy despite its bleak view for the battery making ingredient is IGO Ltd (ASX: IGO). It has a buy rating and $7.50 price target on IGO's shares.

Goldman likes IGO due to its low cost Greenbushes operation, which remains profitable in the current environment. It said:

We are Buy rated on: (1) Valuation, trading on ~0.9x NAV and pricing ~US$1,080/t spodumene (peers ~1.2x NAV and ~US$1,300/t), where near-term FCF yields remain attractive vs. peers; (2) Greenbushes is one of the lowest cost lithium assets (production growth more than offsets increasing strip ratio), where we reiterate further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects with a breakeven/incentive LT spodumene price of ~US$400-500/t, with further optionality from the addition of ore sorters; (3) TLEA dividends support growing net cash.

The broker thinks investors should be selling Core Lithium Ltd (ASX: CXO), Mineral Resources Ltd (ASX: MIN), and Pilbara Minerals Ltd (ASX: PLS) shares. It has sell ratings and price targets of 12 cents, $48.00, and $2.90, respectively. It adds:

We remain Sell on PLS/CXO/MIN, continuing to prefer IGO (Buy) on valuation/FCF, and see increasing corporate positioning for lower lithium prices for longer (reaffirmed by our recent Perth trip) with an increasing focus on reducing costs and upfront capex at projects via purchases of legacy infrastructure from other commodities (MIN, WR1, and others).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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